Forget trade wars, the real US-China clash is a tech war

This matters a great deal for tomorrow’s economic and military battles

Chinese President Xi Jinping with US President Donald Trump outside the Great Hall of the People in Beijing last year. Photo: Li Tao/Xinhua News Agency/PA Images

The risk of a trade war between the United States and China is real enough, reflected in financial market reactions last week. For the moment though what we are seeing is skirmishes, not war, and one imagines there will at least be attempts at bilateral talks before things get much worse.

Still, there is one aspect of last week’s developments that merits particular attention. And that is the tech war, rather than the trade war.

It is no accident that President Trump’s move for 25 per cent tariffs on $50bn of Chinese imports has focused on the ten sectors that China made top priority in the industrial policy strategy document Made in China 2025, adopted in 2015. These sectors include information technology, robotics, aerospace equipment, ocean engineering equipment, new energy vehicles and medicine. Since then, China has adopted several policy strategies designed to make it a world leader in artificial intelligence, quantum computingand communications over the next 10-20 years.

There is no question that the US has been shaken up by China’s rise for some time, but it has taken until now for the White House to call out the threat. Chinese competition in consumer products is one thing, but in tech, America’s backyard, it’s something else. President Trump is not wrong to be concerned. The White House certainly wants to secure a short-term trade advantage over China, but the more fundamental objective is to try and squeeze it in areas forming the core of its industrial strategy. Along with tariff announcements last week, President Trump referred to the World Trade Organisation dispute about Chinese technology licensing practices.

In effect a huge divergence is opening up between China and the west across the technological universe, which matters a great deal for tomorrow’s economic and military power. It is a battle between China’s experiment with digital authoritarianism and the west’s more traditional experience of private sector technology with a public encouragement. In China the Communist Party is ramping up state support and financing for technology, in close partnership with its own tech giants such as Tencent, Baidu, Alibaba, Huawei and Xiaomi but also smaller companies and start-ups. It is going all-out to develop and integrate AI, 5G…

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